By Chino S. Leyco Reporter

STATE-RUN Government Service Insurance System (GSIS) wants shares of Metro Pacific Investment Corp. to be suspended and delisted from the Philippine Stock Exchange (PSE).
In a statement, the government pension fund on Friday cited failure of Metro Pacific, the local unit of Hong Kong-based conglomerate First Pacific Co. Ltd., to “make a truthful” disclosure of its recent acquisition of additional shares in Manila Electric Co. (Meralco).

In an 11-page complaint, Estrella Elamparo, the chief legal counsel of GSIS, said that the call option agreement between Metro Pacific and First Philippine Holdings Corp. is a scheme designed to skirt the rules on mandatory tender offer of the Securities Regulation Code.

Metro Pacific’s “purchase of the 6.7 percent of Meralco shares of First Holdings disguised as a loan cum call option is clearly a device, scheme or artifice calculated to circumvent the mandatory rules on tender offer with no other purpose but to defraud and deceive the investing public,” the complaint read.

Elamparo said that the state pension fund has filed two criminal cases against the Lopez group before the City Prosecutor’s office of Pasig (Metro Manila).

GSIS also filed a case for the suspension and listing of Metro Pacific shares in PSE.
Metro Pacific earlier secured an agreement with First Holdings for the acquisition of the 6.7 percent shares in Meralco, the country’s largest power distributor.

Under the agreement is a provision of an P11.2-billion loan by Metro Pacific to First Holdings and for the Lopez firm First Holdings to grant the Manuel V. Pangilinan group a call option relating to the 6.7 percent, or approximately 74.6 million common shares of Meralco at P300 per share.

The call option is can be exercised at any time from the date it is granted until March 31 next year.
A call option is a financial contract between a buyer and a seller, wherein the buyer has the option to buy stocks at a specified time in the future.

Metro Pacific, led by Pangilinan, and its sister firm, mobile telecommunications company Pilipino Telephone Corp. (Piltel), together control 34.7 percent of Meralco, with 14.7 percent and 20 percent shares of the power utility, respectively.

If MPIC exercised the call option, it would give it and Piltel additional 6.7 percent shares to a controlling stake of 41.7 percent in Meralco.

“This will be well over the tender offer threshold of 35 percent as defined in the Securities Regulation Code, which would require [Metro Pacific] to make a similar purchase offer of P300 per share to the rest of Meralco shareholders including the GSIS,” the pension fund said.

“It is a manipulative practice or machination with the use of inaccurate, incomplete, misleading and untrue statements by misdeclaring that it acquired 14.7 percent in the open market, when in truth and in fact it only bought a limited total of 1.7 percent in order to make it appear that it did not breach the 35-percent threshold which would then compel it to make a tender offer,” Elamparo said.

In a text message, Melody del Rosario, Metro Pacific assistant vice president for media and corporate communications, meanwhile, said that the company has not received a copy of the complaint filed by GSIS.

Metro Pacific “has always endeavored to abide by the rules and standards of disclosure required by the exchange for the benefit of its investing public. We will issue a proper disclosure of [Metro Pacific’s] response as soon as we get hold of the GSIS complaint,” del Rosario added.

Acquisitions of Meralco shares by the Pangilinan group were making SEC look at possible violation of the tender offer rule.

“SEC is in the watching stage, because nobody has filed a request with [us],” SEC Commissioner Ma. Juanita Cueto told reporters.

She said that the corporate regulator still awaits a formal complaint against the transactions entered into by the Lopez family, the owner of Meralco, and the Pangilinan group.

Earlier this month, Metro Pacific exercised its right-of-first-refusal in Meralco shares and matched the P300 per share offer of TriRatna Holdings Corp. for the 6.7-percent stake in the utility.

The additional Meralco shares put up for sale by the Lopezes will cement the Pangilinan group’s stake at 41.7 percent.

Under the tender offer rule, any entity or person who acquires at least 35 percent of a listed company must offer to buy out other shareholders at the same price agreed upon with the block seller.

Last week, GSIS threatened to sue Metro Pacific should the Pangilinan-led group refuse to make a tender offer for the remaining shares held by other Meralco shareholders.